From the Bookshelf

The chapters on corporate debt analysis in “How to Make Money With Junk Bonds” by Robert Levine (McGraw-Hill, 2012) are helpful to bond and stock investors alike. Levine, a high-yield manager, provides an easy-to-follow method for both determining whether a company has too much debt and assessing the odds of the debt being paid off in the future.

The chapters on these topics are typical of the rest of the book. Levine takes the complex subject of credit analysis and explains it in plain language using free and publicly accessible data. Examples of real companies are presented throughout the book to provide more thorough explanations. Plus, the author is up-front about the risks of junk bonds, playing the role of narrator instead of promoter.

We would have liked more detail in the chapter discussing the logistics of bond investing, but our biggest gripe is the size of the text, which some readers may find too small. Kindle and ePub versions of the book are available, however.

Talbott argues that a combination of market structure, governmental and global economic issues make stocks and bonds poor investment choices. Rather, he opines, investors should shift to real assets, such as gold. He goes so far as to call repeatedly for gold to reach $10,000 per ounce over the next 15 to 20 years. In order to meet this target, gold would have to appreciate by 10% for each year of the next 20. Such forecasts rarely turn out to be correct.

The inherent danger in books like Talbott’s is that they can lead investors to strategies that can leave them in worse financial shape than if a more traditional strategy were followed. This is why investors should approach books such as Talbott’s with a high degree of skepticism.

The American Association of Individual Investors is an independent, non-profit corporation formed for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research.